"Family Offices Expand Direct Investments" As Family Offices Gain Influence in Private Capital Markets, Concerns Rise Over a Potential Repeat of the Archegos Collapse

Family offices expand direct investments while bypassing private equity funds
Use of family office structures becoming mainstream worldwide as competition for wealthy clients intensifies
Fears mounting over regulatory blind spots and the emergence of “another Archegos”

Family offices (FOs), the wealth management entities serving ultra-high-net-worth families, are increasingly expanding direct investments into private companies. Rather than routing capital through private equity funds (PEFs) with steep fee structures, they are opting for long-term investments concentrated in individual assets. As family offices emerge as a major new force within private capital markets, backed by deep liquidity and rapid execution capabilities, unease within the market continues to build. Because many family offices operate within regulatory blind spots, concerns persist that turmoil similar to the Archegos Capital collapse could resurface at any time.

Shifting Investment Strategies of Family Offices

On April 23, U.S. financial publication Barron’s reported that family offices have sharply increased direct investments into private companies in recent years. The shift reflects a broader move away from the traditional “2 and 20” private equity fee structure, under which investors pay a 2% management fee and 20% of profits as performance compensation. According to S&P Global Market Intelligence, family offices invested approximately $13 billion directly into private companies last year, marking a 123.3% increase from the previous year.

The trend is expected to further reinforce the role of family offices as independent investment entities. Fundamentally, family offices function as capital providers with immense financial resources and significant execution flexibility. Because they are not required to conduct external fundraising, they can deploy large-scale investments within short periods following internal decision-making. They are also capable of rapidly adjusting investment direction in response to geopolitical and policy developments. When combined with leverage and hedging strategies executed through brokerage relationships with major investment banks, their market impact can become both swift and substantial. The expansion of direct investments by family offices is increasingly viewed as a variable capable of reshaping the balance of power within private capital markets.

Rather than focusing on businesses heavily exposed to public scrutiny and reputational risk — such as initial public offerings (IPOs) or business-to-consumer (B2C) models — family offices are concentrating investments on enterprises with tangible technological competitiveness and fundamentally strong business structures. Recently, the sectors attracting the largest inflows from family office capital have been technology, media and telecommunications (TMT) and commodities. In technology alone, more than $3 billion flowed into 36 transactions last year. One notable example was the $860 million investment made into U.S. private space company Stoke Space Technologies. The commodities sector attracted approximately $4.8 billion from only five deals, including a $4.5 billion investment tied to the acquisition of global glass packaging company Verallia by Brazil’s Moreira Salles family.

Rapid Expansion of the Family Office Market

The market position of family offices is expected to strengthen further over time as their adoption rapidly becomes mainstream among business elites worldwide. According to a report released by global consulting firm Deloitte in 2024, there were more than 8,000 family offices globally at the time of publication. That figure represented an increase of roughly 30% from 6,130 in 2019, with projections indicating the total could exceed 10,720 by 2030. Assets under management are expected to expand from $5.5 trillion in 2024 to approximately $9.5 trillion by 2030.

The role of family offices is also broadening rapidly. Modern family offices have evolved beyond traditional wealth management into integrated organizations overseeing virtually every aspect of affluent family operations. Their responsibilities now extend to tax, inheritance and trust management; administration of privately owned real estate spread across multiple jurisdictions; and advisory services for high-value assets such as private jets, yachts and art collections. Some family offices reportedly oversee personal concierge functions including travel coordination, restaurant reservations and baggage logistics. Many now employ hundreds of staff and operate with structures comparable to independent corporations. Personnel often include wealth managers, household staff, legal and tax professionals, psychologists, security specialists and art advisors.

As the sector expands, competition for clients has intensified as well. What was once considered an exclusive service reserved for ultra-wealthy dynasties is increasingly extending into the upper-middle affluent class. In the United States, for example, wealth management firms have recently launched family-office-style services targeting “mass affluent” clients with investable assets exceeding $1 million. These offerings combine conventional tax, inheritance and investment advisory functions with lifestyle management services. The multi-family office (MFO) market is also expanding rapidly. Unlike the traditional single-family-office model, MFOs allow multiple wealthy families to share costs while jointly utilizing family office services, significantly lowering barriers to entry.

Loose Regulation Fuels Financial Stability Concerns

Despite the sector’s rapid growth, concerns within parts of the market continue to intensify. Unlike private equity funds or hedge funds, family offices are often exempt from complex financial licensing frameworks. In the United States, for instance, the so-called “family office rule” exempts qualifying family offices from investment adviser registration requirements. As long as they manage only family assets without accepting outside investors, they can remain outside the disclosure and supervisory framework of the U.S. Securities and Exchange Commission (SEC). As a result, many U.S. family offices have aggressively expanded leverage, derivatives trading and private-market investments while disclosing little detail regarding their asset size or investment positions.

The concern is that such regulatory blind spots could evolve into a source of broader financial instability. The collapse of U.S. family office Archegos Capital remains the defining example of such risks. Founded by Korean-American investor Bill Hwang, Archegos aggressively expanded through concentrated positions in companies including ViacomCBS, Baidu and Discovery. In particular, the firm utilized derivatives such as total return swaps (TRS) to build investment positions vastly larger than its actual shareholdings, at one point creating market exposure several times greater than its underlying assets under management.

The crisis was triggered in March 2021 when shares of ViacomCBS plunged sharply. Global investment banks, concerned about insufficient collateral, rapidly issued margin calls demanding additional capital to cover mounting losses. Archegos failed to meet those demands, triggering massive forced liquidations across the market. Bill Hwang reportedly lost approximately $20 billion within just two days, while major investment banks including Credit Suisse, Nomura and Morgan Stanley absorbed multi-billion-dollar losses. Hwang was subsequently indicted by U.S. federal prosecutors in 2022 on charges including fraud, market manipulation and securities fraud. In July 2024, a federal jury in New York found him guilty on 10 of 11 charges. The court later sentenced him to 18 years in prison in November of the same year.